If you are one of the hundreds of thousands of Americans permanently traumatized by the government’s highly lauded, but horribly executed, loan modification program, take heart.  I’m here to tell you that there’s another government mortgage program that actually works.

No, really.

It’s called the Home Affordable Refinance Program, or HARP for short, and it has the potential to help millions of Americans refinance into mortgages with significantly lower interest rates, even if the homeowner has little or no equity left in their homes.  In fact, even those homeowners who are “underwater” and owe more than their homes are worth can qualify and finally refinance.

Introduced in 2009, this was always a smart program.  But it was recently improved by the removal of any loan-to-value (LTV) ceilings, at least for those borrowers looking to refinance into a new fixed rate mortgage. So for example, a home owner with a $300,000 outstanding mortgage balance on a home worth only $200,000 could still qualify even though their LTV is 150%.

According to the official HARP website the eligibility requirements for the program are as follows:

  1. The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
  2. The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
  3. The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
  4. The current loan-to-value (LTV) ratio must be greater than 80%.
  5. The borrower must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months.

Confirming whether Fannie Mae or Freddie Mac owns your mortgage is relatively easy thanks to web tools created by each company (Fannie Web Tool; Freddie Web Tool). It is important to note that payments are almost never made directly to Fannie Mae or Freddie Mac, even though they own millions of mortgages.  So even if a borrower makes their payments to a lender like Citimortgage, Bank of America, Chase, etc., there’s still a very good chance that their mortgage is owned by Fannie Mae or Freddie Mac.

Once you’ve confirmed that your mortgage is owned by Fannie or Freddie, or if you want some help figuring that out, then the next step would be to speak to a mortgage lender.  While the traditional LTV requirements are being waived under the HARP program, homeowners still need to have the income and credit scores needed to refinance – and figuring that out is the job of the mortgage lender.

If you want to read more about the HARP program check out the following articles:

Wall Street Journal HARP Article

CBS News HARP Article

Daily Herald HARP Article